Market movers today
- In Norway, we expect a relatively unchanged Q2 oil investment survey, see more below.
- In Denmark, April retail sales are likely to underline the strong comeback in private spending in the wake of reopening of Danish society.
The 60 second overview
Tapering: The message from Fed in terms of tapering their asset purchases continue to resonate as per the latest minutes. Yesterday, Clarida re-iterated such message by being quoted for saying that tapering of asset purchases may happen “in upcoming meetings.” For markets, such tapering would likely be tied to the pricing of interest rate hikes, and depending on the timing and tone it would also limit upside risks to global inflation outcomes; supporting the dollar. The Fed remains reluctant to act on forecasts and would likely need a few (very) good job reports before moving forward with tapering.
Inflation: This morning we sent out the second piece in our series on global inflation, which focuses on the impact of commodity prices on inflation, see Global Research – The impact on inflation of a commodity super cycle, 26 May. We look at three scenarios for commodity prices and what it means for headline inflation in the US and the euro area. In our baseline scenario, US headline inflation peaks in May while euro inflation does not top out until September. In this scenario, the rise in inflation is transitory. In a ‘commodity super cycle’ scenario, the rise in G2 inflation becomes more sustained and stays above 3% on average in 2022. Although developments in core inflation will be key for central bank policy, a peak in headline inflation has historically eased inflation fears in bond markets.
Oil investment survey: In Norway, the Q2 oil investment survey generally sees very limited changes to the oil companies’ estimates for the current year, so we expect the results to show investment this year of close to NOK 175bn, roughly the same as in the previous round. Estimates for the following year tend to be revised up fairly heavily in Q2, however, especially in years when investment is headed upwards. We, therefore, expect investment next year to be revised up from NOK 138.5bn to NOK 140-150bn. The temporary changes to oil taxation do, however, mean unusually high uncertainty.
Equities: Global equities managed to book gains yesterday although US equities lost steam during the day and closed lower. Dow -0.2%, S&P -0.2%, Nasdaq -0.03% and Russell 2000 -1.0%. Interesting to see the comeback for growth stocks (growth has outperformed value by more than 2% during the last week) as yields are softening and Fed speakers are talking about tapering. We still think it is a temporary comeback as the direction for yields should be higher as we move into H2. Asian markets are mostly higher this morning and that goes for both European and US futures as well.
FI: Global bond yields declined yesterday on the back of continued declining inflation expectations as well as comments from central bank officials from both the Federal Reserve and ECB and weaker than expected US economic data.
FX: SEK was top performer among G10 currencies yesterday, where also EUR continued to gain. EUR/SEK fell near to the 10.10 level and EUR/USD rose closer to the 1.23 level.
Credit: CDS indices were in a cheery mood, with iTraxx Xover tightening 3bp (to 254bp) and Main 1/2bp (to 51bp). Cash bonds moved less, with only marginal tightening in both IG and HY.
Nordic macro and markets
SCB releases April unemployment data. Due to quality problems and a new survey methodology, SCB unemployment data are largely disregarded, at least for now, and instead, people are looking at data from PES. Also, the Riksbank releases the Financial Stability Report at 09:30 which we expect will discuss the ongoing boom in housing prices.
